The silly season approaches, as the U.S. Presidential election creeps toward us. As per usual the campaigners — incumbent and otherwise — make all their standard silly claims and promises. Among the most ridiculous, of course, is the bold assertions about JOBS!
It’s a long and tired old story: Keynesians and progressives, like Obama, ferociously puff out their chests over all the jobs they’ve created — or will create. While slick business journalists on Fox remind them that it is businessmen who create jobs. Mitt Romney assures us that having created jobs as a businessman, unlike community organizer Obama, he knows how to do it as a President, too. Surely all these claims can’t be right. And, of course, they’re not. In fact, all these claims are wrong. The truth, so awkward for our presumptive leaders, is simply this: Nobody creates jobs. This idea that jobs can be created is just the flip side of the idea that they can be lost — to China or wherever.
Sure, a business hires people, but how or why? An investor provides funds to pursue a new market, develop a new good or meet under-served demand. To utilize the investment the business has to hire some more people. Customers demand much more of some product or service from the business; it has to hire more people to meet the rising demand. Who created the jobs? The business, the investors, the customers? Where did the investors get the money to invest? Did they borrow it? Were they able to do that because interest rates were low?
Well, imagining for a moment we lived in a free world, where interest rates were not manipulated by state regulation, the only way for interest rates to be low is for lots of people to be accumulating savings. (Central planners who want to claim that they created jobs by rigging interest rates to be artificially low, of course, never want to accept responsibility for the economic impact of the devastating business cycles they instigate.) So, did all those savers create the jobs? Customers may be able to demand more of the good because innovations in some other industries have reduced prices low enough to give the customers more disposable income. Did these other industries create the resulting jobs?
The pretense that some wise, benevolent overlord “creates” jobs simply doesn’t make any sense in light of how economies and markets actually work. Jobs arise out of relationships generated from general conditions of prosperity and that requires taking advantage of innovation, comparative advantage, marginal utility and specialized division of labour. Jobs are a function of the freedom of people to make their own decisions about their priorities and values: a fact that the Keynseians and progressives don’t understand at all and the slick business journalists on Fox all too often only give lip-service.